Chinese economic data and profit taking from investors are putting pressure on copper prices. Analysts are divided on what may be next for the red metal.
Copper prices fell on Thursday (October 19) after rallying above the $7,000-per-tonne mark earlier this week.
LME copper closed 0.3 percent down, at $6,967, a fall of almost 3 percent since Monday’s (October 16) high of $7,177. The red metal had not reached that level since September 2014.
Thursday’s decline came as investors took profits after copper’s rise at the beginning of the week. Meanwhile, Chinese economic data showed growth in the top copper consumer; however, efforts to cut risks in property and debt are beginning to weigh on prospects for the base metal.
“The Chinese data was, on balance, as expected,” said Danske Bank (CPH:DANSKE) analyst Jens Pedersen, who predicts that Chinese growth will slow into next year, with copper prices falling to $6,500 by the end of 2017.
Other analysts are more bullish on copper, which is up more than 25 percent year-to-date. In fact, just this month prices have increased by more than 7 percent.
“I think the fundamentals on copper medium to longer term look very supportive,” Vertical Research Partners’ Michael Dudas told CNBC. The three main drivers for the analyst are: global demand growth exceeding expectations, some shortfalls due to labor unrest and mining declines.
“We’ve had a multiyear decline in spending on exploration and development of the new copper mines, and that just doesn’t turn around overnight,” he added. “We could see a multiyear period where there could be a tightness in the copper market, which should lead to better prices.”
On Thursday, a weaker US dollar lent some support to copper prices. A softer greenback makes commodities priced in dollars cheaper for investors using other currencies.
For investors interested in copper, the Investing News Network recently put together a list of the best copper stocks on the TSX and the TSXV. And don’t forget to check out our copper price update for Q3, which includes an overview of the factors impacting market and what’s ahead for the rest of the year.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.